Russia has Declared All-Out War to Smoking
On October 18, 2012, at the meeting of the government the draft law On Protection of People's Health from the Effects of Tobacco Smoke and Repercussions of Tobacco Consumption was considered and approved. The above draft law introduces, among other things, a complete ban on smoking at public places.
According to different estimates, implementation of the draft law in question may cause serious damage to small and mid-sized businesses which receive a large portion of their profit from sale of tobacco goods.
At the same time, analysis of international experience related to introduction of a ban on smoking at public catering establishments shows that consequences of such a ban (in terms of companies’ activities) may vary in different countries and be either negative or positive, or neutral.
As regards such pricing and tax measures of the draft Federal Law on Protection of People’s Health... as are aimed at reduction of people’s demand in tobacco, in our view, establishment of the minimum retail price on tobacco goods and annual increase in that price at the rate which exceeds the food price index along with growth in the share of taxes in the price on cigarettes (Article 13 of the draft law) – the above measures are provided for by the draft law – will eventually result in tobacco goods (primarily, low-price market segments) becoming more expensive.
Probably, with growth in tobacco prices as a result of implementation of the above measures tobacco will be less affordable to non-adults, and the level of smoking in that age group will drop. In addition to the above, it is to be noted that growth in prices on tobacco goods is in line with the principles of the WHO Framework Convention on Tobacco Control (FCTC, see, in particular, Article 6 of FCTC) which Russia joined in 2008.
М.V. Каzakova, PhD (Economics), Head of the Economic Development Department
At the same time, analysis of international experience related to introduction of a ban on smoking at public catering establishments shows that consequences of such a ban (in terms of companies’ activities) may vary in different countries and be either negative or positive, or neutral.
As regards such pricing and tax measures of the draft Federal Law on Protection of People’s Health... as are aimed at reduction of people’s demand in tobacco, in our view, establishment of the minimum retail price on tobacco goods and annual increase in that price at the rate which exceeds the food price index along with growth in the share of taxes in the price on cigarettes (Article 13 of the draft law) – the above measures are provided for by the draft law – will eventually result in tobacco goods (primarily, low-price market segments) becoming more expensive.
Probably, with growth in tobacco prices as a result of implementation of the above measures tobacco will be less affordable to non-adults, and the level of smoking in that age group will drop. In addition to the above, it is to be noted that growth in prices on tobacco goods is in line with the principles of the WHO Framework Convention on Tobacco Control (FCTC, see, in particular, Article 6 of FCTC) which Russia joined in 2008.
М.V. Каzakova, PhD (Economics), Head of the Economic Development Department